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Read the Fine Print: Job Contracts Can Jeopardize Your Next Gig

Observers Say Noncompete Clauses Have Gotten Stricter, but Are Often Used as Scare Tactics

Hey, senior agency exec, getting ready to quit your job? If you give notice now, you may be able to take that new post by October.

That's right -- a six months' notice clause may actually be in your contract. It's one of several provisions in industry noncompete agreements that observers note are becoming draconian. Contracts can specify three months' notice, but that can go as high as six months for senior executives -- either way, a major career impediment.

"It can be a stumbling block that gets in the way of people being able to get on with their lives," said Rick Kurnit, advertising lawyer at Frankfurt Kurnit Klein & Selz.

Potential employers sometimes ask to see a candidate's contract, and if it contains provisions that pose any problems, "they might just not want to deal with it" given the possibility -- no matter how slight -- of litigation, Mr. Kurnit said.

Whether you are a full-time staffer or freelancer, contract provisions have become more restrictive since the recession as some agencies write broader provisions to protect revenue streams and profit. One former agency lawyer who requested anonymity said that company lawyers will add such provisions, knowing they're most likely unenforceable, "to scare people."

The risk for employees is that such noncompete clauses make them unattractive to other companies. And that can leave employees feeling stonewalled in a business in which getting a new job is the best way to get a raise.

Advertising has been a high-turnover industry since the "Mad Men" era, which is part of what makes these modern restraints troubling.

"When the economy was better, people generally understood that 's how advertising went," the lawyer said. "People jumped ship a lot, and it didn't matter."

It's not unusual for contracts to specify that staffers cannot work on a client (in a fictional example, Coke) at a competing agency for six months to a year, depending on circumstances.

But a twist that raises concerns is the forbidding of employees from working on the account of a Coke rival (in this instance, Pepsi) at another agency. That severely limits those whose main expertise is in a specific category (soft drinks, in this illustration).

And such a noncompete measure can practically handcuff employees looking to leave an agency that has clients in a broad range of categories, keeping them from working in the business altogether. Oddly, the provisions often let staffers work on the client side of a client's competitor, which some suggest means that the provision is more about tying up employees than protecting clients.

Depending on the state, such measures sometimes don't hold up. Noncompetes are typically unenforceable in California, for example.

"In many instances, the emphasis is on [a relatively narrow] nonsolicitation rather than a broader noncompete, because it's more apt to be enforceable," said Tom Finneran, exec VP-agency management at the 4A's.

In a nonsolicitation contract, executives agree that they will not recruit a former employer's clients or workers for a period of time, usually six months to a year.

Observers said agencies and holding companies have focused on the nonsolicitation route to protect themselves from poaching.

"Nonsolicitation provides the agency with protection, yet it does not unduly restrict the person from working in the industry," said Mr. Finneran. It's just narrower."

A number of executives have contested nonsolicitation lawsuits, though most are settled out of court.

Most recently, DraftFCB filed against Digitas and two former DraftFCB employees who defected to that agency. The suit said that the two had violated signed agreements that let them go to a competitor but barred them for one year from recruiting former colleagues at DraftFCB. Further, the suit said, Digitas knew of the provisions but influenced the employees to recruit.
The dispute was settled quickly. It was typical of adland poaching lawsuits, which are often filed to send a message and don't result in a trial or monetary exchange.

The most rigorous provisions are generally reserved for top executives, but even freelancers should pay attention to agreements they're presented with. Observers pointed out that companies have been drawing up stricter contracts for such workers.

"Where I have especially seen them get stricter is when an agency wants to hire a freelancer for a short period yet expects them to sign an unreasonable noncompete/nonsolicitation provision," said the former agency lawyer. "Agencies seem to want to use a one-size fits-all [contract], regardless of how long they plan" to use the person.

"I see more people shocked when they find out they've signed a bad agreement," Mr. Kurnit said. "You really do need to read your employment agreement."
Ad executives, after all, should know to read the fine print.